The settlement follows an FTC complaint alleging that Humboldt processed payments for more than 1,000 merchants that were shell entities serving as fronts or pass-throughs for fraudulent companies engaged in unauthorized billing scams, according to the release.
“This case underscores the FTC’s commitment to holding companies accountable for knowingly supporting fraudulent businesses,” Katherine White, deputy director of the FTC’s Bureau of Consumer Protection, said in the release.
Humboldt said in a Tuesday message posted on its website that the resolution involves the company’s work with a limited number of third-party sales agents and merchants and that this work occurred primarily between 2021 and 2023 under former Humboldt leadership.
Humboldt enhanced its compliance and risk management programs in recent years, cooperated fully with the FTC during this process and made no admissions of wrongdoing, according to the message.
“Humboldt is moving forward and focusing exclusively on supporting its growing portfolio with the integrity, transparency and excellent service its merchants and partners have come to expect,” a Humboldt spokesperson said in the message.
According to the FTC’s press release, the agency’s complaint alleged that Humboldt opened and processed payments for merchants it knew, or consciously avoided knowing, were shell companies for third parties engaged in fraud; opened these sham accounts despite indications that the merchants incurred chargebacks at rates almost 10 times higher than what credit card brands view as excessive; and attempted to increase the volume of transactions processed through these sham accounts by placing them on a lower-risk bank identification number (BIN) used by an affiliated entity to improve the likelihood of approval by cardholders’ banks.
The proposed order announced Tuesday requires Humboldt to pay $12 million for consumer redress and prohibits the company from engaging in or assisting others who are engaged in credit card laundering; processing payments for straw companies, merchants on the Mastercard Alert to Control High-Risk (MATCH) list, merchants that have been subject to law enforcement action and eCommerce entities that use third-party mailbox providers as their only business location and either use negative option billing or do not have a past processing history; making or assisting others in providing false or misleading information to obtain payment processing; and engaging in or assisting those engaged in tactics to avoid fraud and risk monitoring, per the release.
